Christmas closedown cash flow: holiday pay, public holidays and the 15 January pile-up

A Christmas closedown feels like a pause, but for cash flow it’s the opposite. The biggest pay run of the year goes out in mid-December, customer payments slow to a trickle, and then several IRD payments land together in mid-January — before most of your December invoices have been paid. The fix is to size that gap in October, not discover it on 14 January.

This guide walks through the rules that shape the closedown, the dates for the 2026–27 summer, a worked example, and the options for covering the shortfall.

Why is the summer closedown so hard on cash flow?

Most businesses think of December as a strong month. Plenty of them are right — on the profit and loss. The bank account tells a different story, because three things happen out of sync:

1. Wages and holiday pay are paid up front. Staff are typically paid their leave for the closedown in the final pay run before the break, often alongside a normal week’s wages. That can be two or three weeks of payroll leaving in one go.
2. Income stops, but not neatly. Customers’ accounts teams go on leave too. An invoice sent on 15 December on 20th-of-the-month terms usually won’t be paid until 20 January, and anything that misses a customer’s last payment run of the year can slip into February.
3. IRD doesn’t close. It shifts some December deadlines into January, which helps over Christmas and then stacks them up in the third week of January.

Put together, many employers hit their lowest bank balance of the year somewhere between 10 and 25 January. For a construction firm, an engineering shop or a professional services practice, that’s usually a timing problem rather than a profit problem — which is exactly the kind of problem standby working capital is built for.

What are the rules for closing over Christmas?

The Holidays Act 2003 still governs this summer. Its replacement, the Employment Leave Act 2026, received Royal assent in August 2026 but doesn’t come into force until 6 August 2028, so nothing changes for the 2026–27 closedown.

Under the current rules, as set out by Employment New Zealand’s closedown guidance:

• You can have one annual closedown in any 12-month period.
• You must give staff at least 14 days’ notice before it starts.
• Staff who are entitled to annual holidays use them for the closedown. By agreement they can also take leave in advance, or take unpaid leave for any days not covered.
• Staff who aren’t yet entitled — usually because they haven’t completed 12 months — are paid 8% of their gross earnings as at the closedown date, and their anniversary date moves to the start of the closedown.
• Public holidays inside the closedown are paid if the day would otherwise have been a working day for that person, even if they’re on leave for the rest of the break.

That last group — newer staff — is the one that catches owners out. If you’ve hired heavily this year, your holiday pay bill may be lumpier than last year’s, because each new person’s 8% is paid in one hit.

Which public holidays fall in the 2026–27 break?

The public holiday dates published by Employment New Zealand for this summer are:

For a Monday-to-Friday team, that’s four paid public holidays inside a typical three-week closedown. Regional anniversary days, such as Wellington’s, Auckland’s and Nelson’s, fall in late January or early February, so check your region if your break runs long.

When does the IRD money actually leave your account?

This is the part of the plan most owners leave until too late. For a business with a 31 March balance date, the key dates are:

• 15 January 2027 — GST for the taxable period ending 30 November. IRD moves this return from 28 December to 15 January, as its filing GST page explains. For a two-monthly filer, that’s the return covering October and November — often your busiest two months.
• 15 January 2027 — provisional tax, the second instalment under the standard or estimation option (see IRD’s provisional tax payment dates).
• 15 January 2027 — large employers’ PAYE for deductions made 16–31 December. IRD’s page on paying deductions says this is paid “by 15 January not 5 January”.
• 20 January 2027 — small employers’ PAYE for all of December, including the tax on that big pre-Christmas pay run.

So the PAYE on your holiday pay, the GST on your spring sales and a third of last year’s income tax can all fall due within five days of each other — while the business has only just reopened. Our guides on GST timing and provisional tax for seasonal businesses go deeper on choosing settings that spread the load.

Do the building trades get extra breathing room?

Partly. Under the Construction Contracts Act 2002, the definition of “working day” used for payment claims leaves out the period from 24 December to 5 January. That protects payers from having to respond over the break — but it also means a claim you serve in mid-December takes longer, in calendar days, to become payable.

If you’re a subcontractor, get your December claim in as early in the month as the contract allows, and don’t pencil its payment into your January cash plan until you know the date. Our guide to debtor days and payment claims covers the timing in more detail, and our construction and trades funding page explains how facilities are used to pay crews while claims clear.

A worked example: an eight-person joinery workshop

This is an illustrative example, not a real client.

A Hamilton joinery business employs eight staff and closes from Friday 18 December to Monday 11 January. It’s a small employer, files GST two-monthly and pays provisional tax under the standard option.

On the other side, the owner expects $58k from customers before the break and $65k between 11 and 20 January — mostly invoices sent in November and early December. That’s $123k in against $146k out, before a single January timber order is placed.

The business isn’t unprofitable. It’s simply $23k short for about ten days, and possibly more if one large customer pays late. The owner’s options:

• Run the business account down to near zero and hope nothing slips.
• Call IRD in January and ask for time — possible, but it adds interest and penalty risk.
• Arrange a facility in October while the spring figures look strong, draw what’s needed in mid-January, and repay it from February receipts.

If you can already see a gap like this in your own numbers, it’s worth checking your options now rather than in the week before the break.

How do you plan the closedown, step by step?

Treat it as a five-week cash project running from early December to late January:

1. Confirm dates and give notice. Send written closedown dates to staff well before the 14-day cut-off, and note who isn’t yet entitled to annual holidays.
2. Ask your payroll provider for the real figure. Get the gross holiday pay, public holiday pay and 8% holiday pay for the final pay run, plus the PAYE that will follow on 15 or 20 January.
3. Pull your IRD figures from myIR. GST can be estimated from your sales to date; provisional tax is already known if you’re on the standard option.
4. Chase December receipts early. Invoice work as soon as it’s done, confirm each major customer’s last payment run of the year, and offer a direct payment option for smaller accounts.
5. Draw the week-by-week line. Opening balance, money in, money out, closing balance — from the week before your final pay run to the end of January. Our seasonal cash flow plan guide shows the format.
6. Decide how the lowest point gets covered. Your own buffer, a facility, or a mix of both.

Which funding options suit a closedown gap?

The gap is short, predictable and repeats every year, so the fit matters:

• A business line of credit is the natural match. You draw in mid-January for tax or payroll, and each repayment from February’s receipts frees the limit up again for next summer. It’s generally for businesses trading six months or more, assessed on turnover and bank statements. See how our business line of credit works.
• Unsecured working capital suits a one-off need — say, a bigger-than-usual January tax bill after a strong year.
• A property-secured top-up of $20,000 to $1m makes sense if IRD arrears have already built up from previous summers and you’d like to clear them in one go, secured on New Zealand property you or a supporting party own.

If the January IRD dates are the main pressure, our page on paying IRD on time from a facility explains how owners avoid late payment penalties without emptying the account. And if you’d rather self-fund next year, building a cash buffer shows how to size one.

Close for summer without the January squeeze

A good closedown should mean a team that comes back rested — and an owner who isn’t refreshing the banking app on 15 January. The businesses that manage it best are the ones that set up their capital in spring, while the order book is full and the bank statements look their strongest.

That’s where we come in. Capital On Call arranges lines of credit and standby working capital for New Zealand businesses whose cash arrives in waves, and the summer closedown is one of the most common reasons owners call us.

Here’s how it works:

• About 60 seconds to enquire, with no credit check when you first get in touch.
• Your details stay with us. We don’t send them to a pile of lenders, so your phone won’t start ringing off the hook.
• A real person looks at your situation — your closedown dates, your payroll, your January tax — and calls you to talk through what fits.
• Please fill the form in accurately. Real turnover and an honest picture of what you need let us match the right option first time.

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